What does a retailer have to get right in order for its stock to zoom after reporting? Look no further than the clinic Ulta Beauty (ULTA) put on last week in its amazing conference call.
If you don't know Ulta, it is a company that thrives on the need to look your selfie best. Nowhere on the call does it ever talk about how Facebook (FB) , Instagram and Snap (SNAP) have changed people's behaviors. It doesn't address the importance of looking great the moment you leave your apartment or house because you know you will be taking pictures of yourself or someone will be taking pictures of you. In other words, it never talks about the secular tailwind behind the fantastic earnings and the spectacular move in its stock, which has rallied 90 points in the last year from $210 to $302, not to mention the trip from $91 when Mary Dillon was appointed CEO in July 2013. (Facebook is part of TheStreet's Action Alerts PLUS portfolio.)
First, there's no hemming and hawing: Double-digit comparable store sales are the most important metric of all, and it is no different with Ulta. The company posted a 14.3% gain for the quarter, which is all the more amazing when you think that it comes on top of a 15.2% increase.
Second, there were no excuses, no alibis, no talk about delayed federal tax refunds or bad weather or the wretched month of February. There were no alibis because no excuses were needed.
Third, we often think about the comparable store sales gain as involving traffic these days given that it's been so hard to raise prices, the other chief component of the numbers. But, of course, traffic's been hard to come by for many of the mall-based retailers. This company, though, is more often in the more successful strip or second-tier malls and it's getting its comparable sales increases from a balance of traffic, ticket increases and "remarkable strength in e-traffic."
That's the trifecta worth gunning for from now on, especially the strength in e-commerce. Why? Because for many, e-commerce has become cannibalistic. Not Ulta. It's strictly "incremental" as the company describes the channel. Better yet, the company has data that show e-commerce users are also spending more at the bricks-and-mortar stores than before. That's the ideal combination.
Plus, unlike so many other retailers, Ulta, which has fewer than 1,000 stores, needs to put up 100 this year to meet demand. It is making sure it is doing so with measured growth because it doesn't want to overrun its supply chain. A new distribution center in the West will take care of that. Only a few retailers that I follow have to worry about keeping up with demand -- Five Below (FIVE) and Ollie's Bargain Outlet (OLLI) come to mind -- but they have nowhere near this high-quality a problem.
We know the most successful retailers out there have made the most of their loyalty programs to mine the data of what their customers want. Ulta has a phenomenal 24.5 million Ultamate Rewards members, adding 1.1 million to the rolls this quarter and 26% year over year. The company still expects to see rapid growth in loyalty membership, well above square-footage growth, still one more metric they throw at you that puts them in a class by themselves.
That size a market is so attractive to all the cosmetics makers out there that even the most prestigious, like Estee Lauder (EL) with its well-known MAC brand, want to tie up with a company once thought to be well beneath the high-end prestige makers' desires.
Dillon makes much of the notion that Ulta is an experiential retailer and we know we have heard that from so many trying to get in on the millennial generation. But the sheer number of additions and creations and events that Dillon's company throws, most introduced through social media, does make it feel that something's happening every week, if not every day, at Ulta, and women will just want to check it out to see what's happening. That's actual experiential. Plus the "new brand pipeline" that Dillon gushes about gives you an impression that the darned thing's the biotech of retailers.
The salon in the back's comping at 9.8%, a fabulous number, but there is no resting on the laurels there either as the company is partnering with some of the best hair-care companies in the world for more innovation, all the better to keep Amazon (AMZN) away, given that the Seattle behemoth has not yet figured out a way to color or blow out hair.
Yep, every square foot is being used. It's remarkable. And when the leases are up? They negotiate them down because they are a much-coveted tenant, all the better to balance out the higher rent that's coming for a Michigan Avenue store in Chicago and a Manhattan store in the fall.
Ulta's got the playbook. I just don't know if anyone else can crib from it, that's how special this retailer is. While the sun sets on the others, it shines on ULTA.